Last week, Responsible Investor reported that Adam Seitchik, former CIO of Trillium Asset Management, is joining London-based Auriel Capital Management. RI’s Hugh Wheelan wrote that in hiring Mr. Seitchik, Auriel “is joining a growing number of hedge funds building strategies in the responsible investment space.”

Why are absolute return managers becoming more interested in environmental, social and governance (ESG) analysis? According to Mr. Seitchik, the Principles for Responsible Investment (PRI) have spurred broader investor interest in ESG research. In a conversation on June 22, he discussed the impetus behind his move:

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As the Obama Administration seeks to overhaul financial regulation, a multi-trillion-dollar coalition of investors has argued that the government should require corporate disclosure of climate change-related risks. Climate Risk Disclosure in SEC Filings – a deceptively modest title – calls for replacing the current hodgepodge of voluntary disclosure with a federally mandated reporting regime.

Ceres, the Environmental Defense Fund, and other sponsors of this Corporate Library-produced study formally presented their findings to the Securities and Exchange Commission (SEC) in a June 12 letter.

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The Madoff Madness and the Banking Crisis: At one extreme, trustees must dodge sociopathic fraudsters; on the other, they must avoid the hubris of “the smartest guys in the room.”

Modern Portfolio Theory and the legal thinking it’s influenced address the problem by means of risk analysis and diversification. This approach has limits, as Investments & Pensions Europe reported recently: “Dutch pension funds have lost €166m to the Ponzi scheme run by Bernard Madoff, Wouter Bos, the Dutch finance minister has claimed.”

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The British journal Responsible Investor has published an interview with Gro Nystuen, chair of the Norwegian state investment fund’s Council of Ethics. Norway’s government is a leading advocate and practitioner of sustainable/socially responsible investing (SRI).

Ms. Nystuen speaks frankly about how the Norwegian state pension fund puts its good intentions into practice. “The Council consists of five persons who are all experts in the different areas covered by our guidelines,” she says. “This expertise means that we know what we are talking about. It is not a ‘prominent-persons-have-been-politicians’ kind of council, as it could easily have been.”

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As the world’s economy has become more deeply integrated, some investors have sought to hold companies responsible for labor practices throughout their global supply chain. Norges Bank Investment Management (NBIM), which manages pension funds for the government of Norway, released a report in March on corporate initiatives to fight exploitation of child labor. The Sector Compliance Report, which considers firms’ compliance with NBIM labor-practice guidelines, supports a “rights-based approach” to the protection of children.

Beyond Philanthropy

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On March 9, Pax World Management launched the Global Women Investment Index (GWI) as part of its gender investment index series. Pax, creator of the first SRI mutual fund in 1971, is working with KLD Indexes to develop and maintain the GWI. The new series, which is sponsored by the World Bank Group’s International Finance Corporation, seeks to measure and compare corporate performance regarding gender relations in the workplace.

Pax believes that the GWI will demonstrate that gender equality is an important indicator of effective management.

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Last week, President Obama and Congress committed US taxpayers to a $787 billion economic stimulus program. Alan Greenspan has told the Financial Times of his qualified support for bank nationalizations, and this week, the US “signaled that it was willing to raise its equity stake” in Citigroup. A giant Swiss bank has admitted to “conspiring to defraud” the IRS and is turning some customer data over to Federal regulators. A recent Newsweek cover even declared, “We Are All Socialists Now.”

Before the fall of 2008, did anyone think it necessary for government to expand its economic role so dramatically? Some observers did, and one – Nobel Prize winning economist Joseph Stiglitz – believes that socially responsible investment (SRI), in concert with better regulation and corporate governance – is essential to broadly shared, sustainable prosperity.

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[Note from the Editor: Gary Moore was a senior vice president of Paine Webber before founding his own firm as “counsel to ethical and spiritual investors.” He has written five books on the ethical management of money and has been a financial commentator for UPI. He has very graciously permitted us to post his perspective on the Madoff case. Also see a link to his organization at the end of this article. The following is Mr. Moore’s work. – AP]

Bernie Madoff has apparently perpetrated a fifty billion dollar Ponzi scheme that has devastated investor confidence, as well as several charities in Palm Beach. A hedge fund operator in my hometown of Sarasota has apparently perpetrated another swindle of three hundred and fifty million dollars. It too has affected hundreds, as well as the Y on whose board I serve, and several other charities. The more things change…

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The New York Times reports that the price of a college education has grown far faster than incomes over the past 25 years. According to a new study from the National Center for Public Policy and Higher Education, tuitions and fees have increased 439% since 1982, while median income has only increased 147%.

In a somewhat curious understatement, the Center’s Patrick M. Callan tells the Times:

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On October 17, 2008, the Employee Benefits Security Administration (EBSA), an agency within the US Department of Labor, issued two Interpretive Bulletins dealing with the application of considerations other than investment return by ERISA fiduciaries.

This note places one of the two Bulletins in context and suggests what the boundaries on its application may be.

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